There is no environmental, social, and governance (ESG) achievement without the S. Truly social business practices must center on people and work that improves their lives. What are the ESG social issues we need to address? Are they the same everywhere? In this article, we’ll find out what “social” really means, key social business practices, and why listening to people matters.
The “S” in ESG is social
Social business practices
Why do people matter in ESG?
In order to better understand what S is, we must first understand how the field currently defines it. Several ways in which S has been described by experts in the industry include social issues, labor standards, human rights, racial justice, access to health care, workplace diversity, data security, industrial relations or supply-chain concerns.
In recent times, "Stakeholder-centric" IMM emphasizes the "S" in ESG.
What is the "s" in ESG?
The “S” in ESG is social. In fact, the “s” is the only letter in the acronym that specifically refers to people. A 2021 Global Investor Study shows that investors around the world believe social issues are a greater concern now more than ever. What are these social issues? Do we just add women entrepreneurs and stir? Social value and social impact are two interrelated ideas that try to define and capture this.
Often, organizations make statements such as “100 jobs created” or “10 houses built.” What does this mean? How exactly do people benefit from this? This is a social value. Generally, social value is the non-monetary return experienced by people as a result of a program or service. It includes things like:
- improved quality of life
- increased inclusion in society
- reduced stress, etc.
Social value is difficult to measure and quantify, but it is the core of driving social change for businesses.
ESG Social Impact
In impact evaluation, the impact is the positive or negative effect that can be attributed to a program or service. This cause-and-effect process is often visualized in a Theory of Change or other logical models:
- Inputs → Activities → Outputs → Outcomes → Impact
Ultimately, organizations want to say, “the 100 jobs we created led to an improved quality of life for these people,” plus show the data to back it up. This is impact.
Who makes an impact?
Social enterprises (SEs) and nonprofits are key creators of social value and drivers of impact. Corporations are increasingly playing a key role in impact through social business practices.
ESG social business practices
Imagine the meanest, cruelest, most cut-throat business there is. Perhaps you picture Ebenezer Scrooge, whose cold disregard for fellow human beings was the basis of his business. Scrooge is a poster boy for antisocial business practices.
What makes the “S” in ESG social, is centering people in corporate business practices. Corporations can achieve this through social procurement.
When it comes to their supply chain, corporations look for a bargain. The lowest bidder wins and little thought is given to the supplier's business practices. For this reason, supply chains for goods such as cotton, manufactured textiles, cacao, coffee, etc. are full of human rights violations.
Social procurement upends this business practice to make socially driven vendor decisions. Instead, corporations purchase their goods and services from social enterprises. There are a number of reports and initiatives that already indicate substantial success with social procurement.
Why do people matter in ESG?
There is no way to understand our impact unless we communicate with the people we’re trying to help. Too often organizations develop top-down solutions that are pushed on a population without their input. This is a recipe for impact washing.
Centering people necessarily mean centering their experience. Successful social enterprises and nonprofits can get a strong understanding of their impact through their stakeholder’s eyes. Impact measurement and management (IMM) done right must always include the stakeholder’s voice. Stakeholder-centric IMM goes a long way to make ESG social again.
Focus on impact and listen to stakeholders
Social problems and their solutions are highly local. Large corporations don’t always have communication and relationships with local stakeholders. Social enterprises and nonprofits do. They are key partners for corporations in achieving social impact. Sopact can help your organization measure and manage your impact through the stakeholder’s voice. Contact us to get started.